Debt Outlook Cloudy

Debt activity in commercial real estate has dropped sharply in 2023, according to a new report. That might not really be a surprise given the macroeconomic brouhaha, but it’s still one more indicator that the rough times are far from over. Meanwhile, industrial continues to shine as a bright spot. A multi-billion-dollar deal is the latest evidence.

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— Tom Acitelli, Co-Deputy Editor

Cloudy Outlook: CMBS Distress and Low Deal Volume Create CRE Pessimism

“When it rains, it pours” is by now a familiar maxim. But for commercial real estate capital markets, it might as well be considered law in today’s stormy transaction climate. Yardi Matrix data analytics released its June 2023 report on the state of the debt market following the Commercial Real Estate Finance Council (CREFC) annual conference in New York City this month. Yardi Matrix found that in 2023 industry transaction activity has plummeted, the cost of fixed-rate and floating-rate debt has skyrocketed, and loan delinquencies for commercial mortgage-backed securities (CMBS) are on the rise. “Weak investor demand for CMBS has prompted risk spreads and loan coupons to increase, which makes CMBS and CLOs [collateralized loan obligations] less attractive to borrowers than other kinds of financing,” Paul Fiorilla, director of research at Yardi Matrix, told Commercial Observer. “CMBS and CLO issuance has slowed dramatically, and even agency multifamily issuance has taken a hit this year.”

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Prologis to Drop $3.1B on Blackstone Warehouse Portfolio

Industrial powerhouse Prologis’s portfolio will grow by approximately 14 million square feet after it agreed to pay Blackstone $3.1 billion for warehouses and distribution properties across the country, the companies announced Monday. The cash deal allows Prologis to work toward its goals of expansion and growth, Dan Letter, president of Prologis, said in a press release. Prologis currently owns 1.2 billion square feet of real estate in 19 countries. The sale will expand its presence in spots such as Atlanta, Dallas, Southern Florida and parts of California, among other areas. In addition to growing its presence, the deal will expand Prologis’s relationship with 50 existing customers while adding 77 new customers, the company said in the release.

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